Half Yearly Report

RNS Number : 0700Y

Computacenter PLC

27 August 2009

 

Computacenter plc
Interim results announcement

Computacenter plc, the European IT infrastructure services provider, today announces unaudited results for the six months ended 30 June 2009.

FINANCIAL HIGHLIGHTS

Financial performance

• Adjusted* profit before tax increased 62.0% to £18.2 million ( 2008: £11.3 million)

• Adjusted* diluted earnings per share increased 81.1% to 9.6p (2008: 5.3p)

• Group revenues decreased 2.2% to £1.22 billion (2008: £1.25 billion) and by 8.3% in constant currency

• Interim dividend increased 11.1% to 3.0p per share (2008: 2.7p)

• Net cash before customer-specific financing ('CSF') of £47.3 million (H1 2008: net debt of £29.7 million) 

Statutory Performance 

• Profit before tax increased 9.0% to £12.0 million (2008: £11.0 million)

• Exceptional charge of £6 million (2008: nil) related to our change programme

• Diluted EPS increased 21.2% to 6.3p (2008: 5.2p)

• Net debt after CSF of £18.1 million (2008: net debt of £95.9 million) 

OPERATING HIGHLIGHTS

• Group annual services contract base grew 8.0% to £487.3 million, based on constant currency 

• Services now contribute 47.3% of Group adjusted* gross profit (2008: 42.6%)

• UK cost reduction and simplification programme substantially complete, realising operational efficiencies and achieving a reduction of over £13 million in SG&A costs. 

• Substantial progress achieved in Germany with further managed services successes

• Strong services growth and efficiency programme helped reduce Computacenter France adjusted* operating loss by 25.1% 

Mike Norris, Chief Executive of Computacenter plc, commented:

'Computacenter made strong progress in the first half of the year, reflecting success in sharpening our focus on cost reduction, growth in contractual services and exiting from businesses that use capital inefficiently. This was achieved in spite of the challenging economic backdrop, which has impacted sales of products and integration projects. The continuing trend in our business mix towards contractual services improves the long term visibility and predictability of our earnings and the pipeline for the future is encouraging. 

'We are pleased with progress to date. Whilst much remains to be done, we are confident that we are on track for the year as a whole. Looking further ahead, our increased services mix, allied with our strong and strengthening balance sheet, gives us encouragement for growth in the future.'

* Adjusted for exceptional items and amortisation of acquired intangibles and stated after charging finance costs on customer-specific financing.

Computacenter plc.
Mike Norris, Chief Executive	01707 631 601
Tessa Freeman, Investor Relations	01707 631 514
www.computacenter.com
Tulchan Communications	020 7353 4200
Stephen Malthouse
Lucy Legh
www.tulchangroup.com

Computacenter's half-yearly financial report is available to view and download at www.computacenter.com/investor.  High resolution images are available for the media to view and download free of charge from www.computacenter.com/press.

Chairman's Statement

At the beginning of 2009 we set out on a three-year programme of actions to improve the profitability of our business. 

The key elements are:

• Rigorous segmentation of our market to ensure we focus on customers who ascribe high value to our offerings.
• Continual improvement in the use of working capital.
• Accelerating growth in our managed service business.
• Maintaining or growing market share in those product reselling segments we choose to serve.
• Simplification of our organisation.
• Significant reduction in our cost and expense base.
• Investment in a Group wide single ERP system with a three-year implementation programme.

What progress have we made, six months on? A few comments on the prevailing economic environment first. GDP in all the countries in which we operate has declined and we have seen a significant consequent reduction in our customers' operating budgets. This is no surprise and we expect this to continue for the foreseeable future. These are the circumstances in which we operate and our actions as described above were put in place knowing the challenges we will face.

I am pleased with the progress we have made in the first six months of 2009; it's best summarised as 'so far, so good'. We have seen growth in revenue and profitability in our managed services business, the result of customers seeing value in our offerings. Our product business has declined in revenue by 14% (in constant currency), which we believe is less than the market decline. Our net cash position before Customer Specific Finance (CSF) is some £77 million better, compared with the same period last year. We have substantially completed our simplification and cost reduction programme in the UK, resulting in an annualised improvement in excess of our £15 million target. Our ERP investment programme is on track for completion in 2011 and on budget.

There is much more to do, but I am encouraged by what our people have achieved in the first half of this year; a 62% improvement in adjusted* profit before tax compared with last year is a good start. We have clear targets for the business over the next three years, the achievement of which is designed to deliver steady value growth for our shareholders. 

While Computacenter is clearly delivering customer value today, we can and must continue to demonstrate increased value in the years to come. I thank all of our people for their efforts and their contribution to these results.

* Adjusted for exceptional items and amortisation of acquired intangibles and stated after charging finance costs on customer-specific financing.

Interim operating review

Group summary

Computacenter made strong progress in the first six months of 2009, delivering a pleasing 62.0% increase in adjusted* profit before tax to £18.2 million (H1 2008: £11.3 million). This reflects our success in sharpening our focus on cost reduction, growth in contractual services and exiting from businesses that use capital inefficiently. The improvement is somewhat flattered by a weaker comparative period for the first quarter of 2009 versus Q1 2008. Mainly as a result of higher profitability, adjusted* diluted earnings per share ('adjusted* EPS') for the period grew 81.1% to 9.6p (H1 2008: 5.3p). 

After taking account of exceptional items and amortisation on acquired intangibles, on a statutory basis, profit before tax increased by 9.0% to £12.0 million (H1 2008: £11.0 million), and diluted earnings per share grew by 21.2% to 6.3p (H1 2008: 5.2p).

We are pleased to announce the payment of an increased interim dividend of 3.0p per share (H1 2008: 2.7p) to be paid on 9 October 2009 to shareholders on the register as at 11 September 2009. 

Our strong progress was achieved in spite of the challenging economic backdrop, which has impacted sales of products and integration projects. Overall reported revenues reduced by 2.2% and were down 8.3% in constant currency. 

The growth in our contractual services base of 8.0% to £487.3 million has helped performance in the first half of 2009 and will have a more significant positive impact on the second half of the year and in years to come. Services now contribute 47.3% of Group adjusted* gross profit (2008: 42.6%) and this continuing trend in business mix improves the long term visibility and predictability of our earnings. Whilst in the first half we have been focused intensely on a number of new contract start-ups, the pipeline for the future is also encouraging. 

We previously anticipated an exceptional charge for the full year of approximately £5 million. However the charge reported in H1 is £6.0 million, as a result of a £1.9 million charge related to premises vacated by the sales force serving our smaller customers. Of the remaining £4.1 million expenditure, £2.7 million was spent in the UK, mainly on reshaping our management and sales function to reflect the strategic changes we have made, and £1.4 million of exceptional charges were expensed in reducing the cost base of our operations in France and Benelux. We expect no material exceptional charges in the second half of the year. 

We continue to strengthen our balance sheet, with net funds excluding customer-specific financing (CSF) of £47.3 million (H1 2008: net debt of £29.7 million) at the period end. Including CSF, net debt was £18.1 million (H1 2008: £95.9 million). As we announced in our full year report for 2008 and in our July pre-close statement, we saw robust cash generation as a result of our exit from the trade distribution of PC, laptop and printer sales, reducing working capital by £18 million in H1, which is ahead of our initial estimate of £15 million for the year. Cash generation was also assisted by increasingly effective stock controls and a general slowdown in our product business due to the economic climate. 

We remain on time and budget with our implementation of a new Group wide ERP system, which we expect to complete in 2011. We previously estimated the cost at £25 million over three years, of which approximately 55% has been spent to date. 

Looking particularly at the second half of 2009, we are confident of further progress in our contractual services business, but expect the current decline in capital expenditure on IT equipment to continue across our geography.  We will remain rigorous in the cost management of our business and, while much remains to be done, we are confident that we are on track for the year as a whole. Looking further ahead, our increased services mix, allied with our strong and strengthening balance sheet, gives us encouragement for growth in the future.  

UK

We saw a strong improvement in UK performance compared to the same period in 2008, with adjusted* operating profit growing 42.2% to £12.6 million (H1 2008: £8.9 million). The improvement is largely a result of our change programme, begun late last year, which focused on reducing costs, ensuring an improved capital return and further sharpening our focus as a services and solutions company. An exceptional charge relating to this programme, totalling £4.6 million, was incurred in H1.

We delivered a £13.4 million reduction in UK Sales, General and Administration (SG&A) costs in the period, in addition to the reduction in working capital relating to our trade distribution arm stated above.

Revenues declined 11.8% to £624.9 million (H1 2008: £708.1 million), with approximately £37 million of this reduction attributable to our exit from the insufficiently profitable trade distribution markets. Services revenues grew 7.8% which was driven mainly by growth in contractual services. The economic climate is favourable to our offerings in this area, which focus on the removal of cost and risk from IT infrastructures. End-user product revenues declined 12.4% due to a weak economic environment, although against estimates of a product market deterioration we believe we are at least retaining market share.

Customers' expenditure on professional services declined as customers put non-critical project expenditure on hold. This also contributed to product revenue decline, as integration or transformation projects would normally include hardware and software sales. However we were successful in securing a major datacentre optimisation project for Transport for London (TfL), which is expected to generate significant savings for the customer by facilitating the consolidation of 70 computer rooms into two datacentres.

After the period end we announced the extension of the UK element of our desktop services contract with BT for a further three years through to 31 March 2015. Associated with this extension are a number of minor amendments but two are of significance. Computacenter will transfer part  of the contract back to BT, representing approximately 20% of the UK contract value, including the corresponding staff, and no future UK capital purchases will utilise Computacenter CSF (Customer Specific Financing). All fixed assets currently under CSF will remain so until the end of the relevant term. The non-UK element, which represented around 25% of the original BT contract, is completely unaffected in both terms and duration.

The UK contract base grew by 8.7% in H1 to £221.2 million, after excluding approximately £12 million related to the UK product element of the BT contract. This one-off adjustment, which applies from June onwards and retrospectively, is made to avoid distortion and relates to the gradual expiry of this product element over the next five years. While there will be a reduction in the UK services element of the BT contract in H2, we anticipate this will be more than offset by new contract wins.

We saw a number of significant contract wins in the period. These include a three-year contract with INVISTA, one of the world's largest integrated producers of polymers and fibres. The contract, worth over £3 million, includes provision of a multi-lingual service desk from our Barcelona location, datacentre managed services and hosting from our Manchester facility, remote server management from our offshore operations in Cape Town and network services from the UK. 24x7 field and deskside services are also provided across all European locations.

In the public sector we won a four-year outsourcing and infrastructure transformation contract with NHS Oldham. The contract, which covers datacentre, network and desktop management and support, is designed to help the PCT deliver high quality healthcare services and meet the requirements of the NHS National Program for IT.

We also renewed our contract with John Lewis Partnership for desktop, laptop and print support for a further three years. The contract was extended to include the provision of maintenance for the Retail Store EPOS infrastructure. 

We continue to increase our e-commerce integration with major suppliers, with 34.4% of orders placed via e-commerce transactions in the period (H1 2008: 20.0%), helping reduce our operating costs. We also improved our inventory management processes to further minimise stock write-downs and disposals. 

RDC, our remarketing and recycling arm, recorded its strongest first quarter and although volumes declined slightly in Q2, overall revenues increased 31.6% in H1 09. In April 2009 RDC was, for the second time, awarded a Queen's Award for Enterprise. The award was in the category of Sustainability and followed the company's success in the Innovation category in 2002.

Germany

In Germany, adjusted* operating profit improved 52.5% in local currency. In sterling, this translates to an increase of 75.7% to £7.2 million. This strong improvement in profit performance was aided by an increase in services margins. Revenue decreased by 1.0% in local currency and increased 14.1% in sterling to £433.3 million (H1 2008: £379.8 million).  

The challenging economic environment particularly affected product sales, which decreased 4.3% in local currency. This was partly offset by 4.5% sales growth in services, accelerating the change of business mix over the past few years towards higher-margin offerings. 

The continued services growth was largely attributable to our ongoing investment in contractual services. Growing customer interest in cost reduction, improved efficiency and compliance helped drive strong demand for our services and helped offset a slight decline in other areas of our professional services business. A major outsourcing contract signed in 2008 became fully revenue-generating this year, helping further drive service volumes.

The level of services profitability achieved in 2008 was sustained in H1 2009, due to the ongoing success of management initiatives and our strategic investment in improving the profitability of a number of large and complex outsourced datacentre contracts. Product margins also held up well despite falling volumes, assisted by the growing proportion of higher margin network, server and storage technology in the product mix. We were also successful in significantly reducing the cost of sale in our product business through the automation of our direct shipment process, enabling us to process orders more quickly and reduce our inventory.

Customers' growing interest in virtualisation solutions to improve the efficiency and cost-effectiveness of their desktop infrastructures is driving strong demand for our services in this area. This has led us to include desktop virtualisation solutions as a key component of our managed services portfolio, complementing our existing project-based offerings.

In our datacentre business we attained the first Authorized Technology Provider certification in Europe for Cisco´s new Unified Computing System (UCS), as well as being named Datacentre Partner of the Year in Germany and Europe. 

Key wins in the period include a managed service contract for Daimler AG's network and security operations in Europe. The contract covers 130,000 ports and over 650 firewalls as well as the monitoring of all WAN connections worldwide. We also further extended our presence in the growing unified communication and collaboration market, securing major projects in this area with a large social insurance provider and a major bank. 

Helping further the Group's strategic goal of broadening the range and depth of our services activities, we were awarded a contract to implement an innovative, state-of-the-art identity management solution for the German Federal Employment Agency. 

France

Despite a difficult economy our French operation continued to show steady improvement. Profit performance was above expectation, with our ongoing cost reduction programme and further services growth reducing the adjusted* operating loss by 25.1% to £1.4 million (H1 2008: loss of £1.9 million). The product market remains highly challenging as customers reduce or delay their technology investments, resulting in an overall revenue decline of 11.0% in local currency compared to H1 2008. However, due to beneficial currency movements, reported revenue increased 2.6% to £151.1 million (H1 2008: £147.2 million).

The decline in local currency product revenues hides a strong increase in services revenues of 10.5% (H1 2008: 11.3%), helped by the consolidation of our short term professional services contract base into contractual services business, where revenues grew 29.2% This strong services growth, which is well ahead of a flat market forecast for 2009, demonstrates further progress in our efforts to increase the services mix of our French operation. Total services now account for nearly 20% of revenue (H1 2008: 15.4%) and we have opened a new helpdesk facility at our headquarters in Roissy, near Paris, to allow for further growth.

The operating loss reduction was driven by a number of factors. Despite revenue decline, margins remained stable across the product business. Services margins continued to grow driven by increased volume, a leaner, more cost-efficient organisation, and the implementation of new tools to improve resource utilisation and efficiency. We also streamlined the senior management and services teams and realised a substantial reduction in our fixed cost base. An exceptional charge of £1.2 million has been recorded.

In addition, further to the Group's strategic goal of reducing the cost of sale in our supply chain business, we re-engineered our main French logistic facility to optimise throughput, reduce item cost and improve competitiveness.

Computacenter France also delivered an improved financial situation, mainly due to working capital optimisation resulting in a further reduction of average debt. As a consequence of decreasing interest rates, finance costs have dropped by more than 65% over H1 2008 in local currency. The Group also leveraged its strong cash position to provide internal financing for the French business to cover more than two thirds of its average H1 2009 debt.  

We saw some pleasing contract successes in H1 2009, particularly the renewal of a portion of our business with the French Army, our largest customer. The second and final award is expected in September 2009.

New contractual services customers include the Chamber of Industry and Commerce of Marseille, a Conseil Général and MGEN, the mutual insurance company for the Ministry of Education. We also won significant contracts with EDF to provide deskside support services for 57,000 users and a significant enterprise services contract, from solution design to implementation and back-up, with a leading energy firm. Supply successes include a major contract with CNAM TS, a social security public body, covering 18,000 users and a supply and maintenance contract with RATP, the Paris transport authority.

While we are aware that much remains to be done to deliver long term profitability, we continue to see underlying improvements in profit performance, led particularly by contractual services growth. 

Benelux

Our Belgium and Netherlands operation recorded an adjusted* loss of £166,000 (H1 2008: profit of £69,000), mainly reflecting a difficult product market. Although overall revenues declined 24.0%, in constant currency, services revenues grew 1.5%, driven mainly by managed services contracts and storage projects. 

We launched several initiatives to reduce our cost base and encourage higher-margin sales growth, which led to restructuring costs of £241,000 (H1 2008: nil) in the first half. 

Our Luxembourg operation showed a loss of £244,000 (H1 2008: loss of £137,000) with a revenue decline of 40.0% in constant currency. This decline is due to our strategic decision to stop local product supply activities in Luxembourg as of Q2 2009. 

Key Benelux wins include a European rollout project at Tessenderlo Chemie, a Wireless LAN implementation at Sibelco, a licensing optimisation project at Tele Atlas and a high-end storage project at ADB.

Group risk statement

The principal risks to our business and our approach to mitigating those risks remain as set out on page 19 of our 2008 Report and Accounts. The Group is addressing the principal strategic risk of a prolonged economic recession through enhanced offerings which help customers remove cost and risk from their IT expenditure, a continuing focus on those sectors that offer the greatest opportunities for market share growth, and ongoing internal cost removal. In addition, strategies remain in place to mitigate operational risks, in particular those relating to the implementation of complex end-to-end service contracts, the return of the French business to profit, and progress of the Group-wide ERP project.

* Adjusted for exceptional items and amortisation of acquired intangibles and stated after charging finance costs on customer-specific financing.

Responsibility Statement

The Directors confirm that to the best of their knowledge:

       • this financial information has been prepared in accordance with IAS 34;

• this interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

• this interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

MJ Norris                       FA Conophy

Chief Executive              Finance Director

26 August 2009              26 August 2009

On behalf of the Board

Independent review report to Computacenter plc 

Introduction 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, and the related notes 1 to 11. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union. 

Our Responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

Ernst & Young LLP

Luton

26 August 2009 

Consolidated income statement
For the six months ended 30 June 2009
	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Product revenue	846,834		923,193		1,875,857
Professional services revenue	85,712		83,993		181,219
Support and managed services revenue	289,638		243,074		503,059
Total services revenue	375,350		327,067		684,278
Total revenue	1,222,184		1,250,260		2,560,135
Cost of sales	(1,051,560)		(1,080,722)		(2,205,276)
Gross profit	170,624		169,538		354,859
Distribution costs	(9,686)		(10,578)		(20,268)
Administrative expenses	(140,947)		(146,258)		(288,418)
Operating profit:
Before amortisation of acquired intangibles and exceptional items	19,991		12,702		46,173
Amortisation of acquired intangibles	(259)		(268)		(525)
Exceptional items	(6,003)		-		(3,046)
Operating profit	13,729		12,434		42,602
Finance revenue	1,000		1,502		3,095
Finance costs	(2,748)		(2,946)		(6,161)
Profit before tax:
Before amortisation of acquired intangibles and exceptional items	18,243		11,258		43,107
Amortisation of acquired intangibles	(259)		(268)		(525)
Exceptional items	(6,003)		-		(3,046)
Profit before tax	11,981		10,990		39,536
Income tax expense:
Before exceptional items	(3,851)		(3,068)		(10,571)
Tax on exceptional items	1,276		-		-
Exceptional tax items	-		-		8,377
Income tax expense	(2,575)		(3,068)		(2,194)
Profit for the period	9,406		7,922		37,342
Attributable to:
Equity holders of the parent	9,406		7,922		37,337
Minority interests	-		-		5
Profit for the period	9,406		7,922		37,342
Earnings per share
- basic for profit for the period	6.4p		5.3p		24.7p
- diluted for profit for the period	6.3p		5.2p		24.2p

Consolidated statement of comprehensive income
For the six months ended 30 June 2009
	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Profit for the period	9,406		7,922		37,342
Exchange differences on translation of foreign operations	(12,161)		3,886		24,864
Total comprehensive income for the period	(2,755)		11,808		62,206
Attributable to:
Equity holders of the parent	(2,753)		11,808		62,198
Minority interests	(2)		-		8
	(2,755)		11,808		62,206

Consolidated balance sheet
As at 30 June 2009
	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Non-current assets
Property, plant and equipment	113,392		114,407		123,315
Intangible assets	52,503		46,156		51,551
Deferred income tax asset	17,674		8,577		16,672
	183,569		169,140		191,538
Current assets
Inventories	71,056		94,665		105,831
Trade and other receivables	403,101		477,082		529,501
Prepayments	59,214		51,648		53,766
Accrued income	70,229		44,028		43,942
Cash and short-term deposits	75,542		37,113		53,372
	679,142		704,536		786,412
Total assets	862,711		873,676		977,950
Current liabilities
Trade and other payables	332,022		350,867		378,721
Deferred income	107,648		92,713		115,274
Financial liabilities	64,362		87,355		96,154
Forward currency contracts	25		59		644
Income tax payable	3,849		5,521		10,275
Provisions	2,439		2,133		2,100
	510,345		538,648		603,168
Non-current liabilities
Financial liabilities	29,256		45,699		41,809
Provisions	10,337		12,143		9,565
Other non-current liabilities	381		1,355		615
Deferred income tax liabilities	1,515		1,818		1,582
	41,489		61,015		53,571
Total liabilities	551,834		599,663		656,739
Net assets	310,877		274,013		321,211
Capital and reserves
Issued capital	9,184		9,181		9,181
Share premium	2,890		2,890		2,890
Capital redemption reserve	74,950		74,950		74,950
Own shares held	(9,838)		(11,273)		(11,169)
Foreign currency translation reserve	14,207		5,393		26,368
Retained earnings	219,465		192,859		218,970
Shareholders' equity	310,858		274,000		321,190
Minority interest	19		13		21
Total equity	310,877		274,013		321,211

Approved by the Board on 26 August 2009

MJ Norris, Chief Executive                    FA Conophy, Finance Director

Consolidated statement of changes in equity

	Attributable to equity holders of the parent
	Issued capital	Share premium	Capital redemption reserve	Own shares held	Foreign currency translation reserve	Retained earnings	Total	Minority interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2008	9,504	2,890	74,627	(11,380)	1,507	201,035	278,183	13	278,196
Profit for the period	-	-	-	-	-	7,922	7,922	-	7,922
Other comprehensive income	-	-	-	-	3,886	-	3,886	-	3,886
Total comprehensive income	-	-	-	-	3,886	7,922	11,808	-	11,808
Cost of share-based payment	-	-	-	-	-	1,573	1,573	-	1,573
Purchase of own shares	-	-	-	(9,501)	-	-	(9,501)	-	(9,501)
Cancellation of own shares	(323)	-	323	9,608	-	(9,608)	-	-	-
Equity dividends	-	-	-	-	-	(8,063)	(8,063)	-	(8,063)
At 30 June 2008	9,181	2,890	74,950	(11,273)	5,393	192,859	274,000	13	274,013
Profit for the period	-	-	-	-	-	29,415	29,415	5	29,420
Other comprehensive income	-	-	-	-	20,975	-	20,975	3	20,978
Total comprehensive income	-	-	-	-	20,975	29,415	50,390	8	50,398
Cost of share-based payment	-	-	-	-	-	952	952	-	952
Exercise  of options	-	-	-	298	-	(298)	-	-	-
Purchase of own shares	-	-	-	(194)	-	-	(194)	-	(194)
Equity dividends	-	-	-	-	-	(3,958)	(3,958)	-	(3,958)
At 31 December 2008	9,181	2,890	74,950	(11,169)	26,368	218,970	321,190	21	321,211
Profit for the period	-	-	-	-	-	9,406	9,406	-	9,406
Other comprehensive income	-	-	-	-	(12,161)	-	(12,161)	(2)	(12,163)
Total comprehensive income	-	-	-	-	(12,161)	9,406	(2,755)	(2)	(2,757)
Cost of share-based payment	-	-	-	-	-	1,076	1,076	-	1,076
Exercise of options	3	-	-	1,890	-	(1,890)	3	-	3
Purchase of own shares	-	-	-	(559)	-	-	(559)	-	(559)
Equity dividends	-	-	-	-	-	(8,097)	(8,097)	-	(8,097)
At 30 June 2009	9,184	2,890	74,950	(9,838)	14,207	219,465	310,858	19	310,877

Consolidated cash flow statement
For the six months ended 30 June 2009
	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Operating activities
Profit before tax	11,981		10,990		39,536
Net finance costs	1,748		1,444		3,066
Depreciation	17,932		17,514		36,719
Amortisation	2,199		2,145		4,764
Share-based payment	1,076		1,573		2,525
Loss on disposal of property, plant and equipment	229		273		526
Impairment of intangible assets	-		-		3,046
Loss on disposal of intangible assets	26		(23)		48
Decrease in inventories	28,247		19,954		19,793
Decrease/(increase) in trade and other receivables	57,946		(42,235)		(34,844)
(Decrease)/increase in trade and other payables	(24,495)		16,447		16,190
Other adjustments	(428)		2,090		(760)
Cash generated from operations	96,461		30,172		90,609
Income taxes paid	(10,029)		(5,527)		(6,052)
Net cash flow from operating activities	86,432		24,645		84,557
Investing activities
Interest received	927		1,871		3,884
Sale of property, plant and equipment	4		12		30
Purchases of property, plant and equipment	(5,064)		(2,471)		(10,065)
Purchases of intangible assets	(3,526)		(2,922)		(14,278)
Net cash flow from investing activities	(7,659)		(3,510)		(20,429)
Financing activities
Interest paid	(2,623)		(3,536)		(7,254)
Dividends paid to equity shareholders of the parent	(8,097)		(8,063)		(12,021)
Proceeds from issue of shares	3		-		-
Purchase of own shares	(559)		(9,501)		(9,695)
Repayment of capital element of finance leases	(10,476)		(10,281)		(25,713)
Repayment of loans	(28,775)		(7,265)		(28,633)
New borrowings	11,235		7,509		46,610
(Decrease)/increase in factor financing	(15,601)		18,818		12,763
Net cash flow from financing activities	(54,893)		(12,319)		(23,943)
Increase in cash and cash equivalents	23,880		8,816		40,185
Effect of exchange rates on cash and cash equivalents	(1,081)		(1,477)		(562)
Cash and cash equivalents at the beginning of the year	46,889		7,266		7,266
Cash and cash equivalents at end of the period	69,688		14,605		46,889

Analysis of net funds
	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Cash and cash equivalents	69,688		14,605		46,889
Factor financing	(22,427)		(44,324)		(42,280)
Net funds/(debt) excluding customer-specific financing	47,261		(29,719)		4,609
Finance leases	(48,892)		(50,004)		(55,191)
Other loans	(16,444)		(16,218)		(34,009)
Total customer-specific financing	(65,336)		(66,222)		(89,200)
Net debt	(18,075)		(95,941)		(84,591)

Notes to the accounts

1 Corporate information

The interim condensed consolidated financial statements of the Group for the six months ended 30 June 2009 were authorised for issue in accordance with a resolution of the Directors on 26 August 2009. 

Computacenter plc is a limited company incorporated and domiciled in England whose shares are publicly traded.

 2 Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2009 have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. They do not include all of the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2008.

3 Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements for the year ended 31 December 2008, except for the adoption of new Standards and Interpretations as of 1 January 2009, noted below:

IFRS 2 Share-based payment - Vesting conditions and cancellations

The Standard has been amended to clarify the definition of vesting conditions and to prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. The adoption of this amendment did not have any impact on the financial position or performance of the Group.

IFRS 8 Operating Segments

This standard requires disclosure of information about the Group's operating segments and replaces the requirement to determine primary (geographical) and secondary (business) reporting segments of the Group. The Group determined that the operating segments were the same as the business segments previously identified under IAS14 Segment Reporting. Additional disclosures about each of these segments are shown in Note 4, including revised comparative information.

IAS 1 Revised Presentation of Financial Statements

The revised standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in a single statement, or two linked statements. The Group has elected to present two statements.

4 Segment information

For management purposes, the Group is organised into geographical segments, with each segment determined by the location of the Group's assets and operations. The Group's business in each geography is managed separately and held in separate statutory entities.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its geographical segments separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on adjusted operating profit or loss which is measured differently from operating profit or loss in the consolidated financial statements. Adjusted operating profit or loss takes account of the interest paid on customer-specific financing ('CSF') which management consider to be a cost of sale. Excluded from adjusted operating profit is the amortisation of acquired intangibles, exceptional items and the transfer of internal ERP implementation costs as management do not consider these items when reviewing the underlying performance of a segment.

Segmental performance for the periods to H1 2009, H1 2008 and Full Year 2008 were as follows:

Six months ended 30 June 2009 (unaudited)
		UK	Germany	France	Benelux	Total
		£'000	£'000	£'000	£'000	£'000
Revenue		624,888	433,315	151,085	12,896	1,222,184
Results
Adjusted gross profit		87,772	60,336	18,996	1,496	168,600
Adjusted net operating expenses		(75,155)	(53,131)	(20,442)	(1,905)	(150,633)
Adjusted operating profit/(loss)		12,617	7,205	(1,446)	(409)	17,967
Adjusted net interest		653	(50)	(282)	(45)	276
Adjusted profit/(loss) before tax		13,270	7,155	(1,728)	(454)	18,243
Reconciliation to reported profit before tax
Adjusted gross profit		87,772	60,336	18,996	1,496	168,600
Add back interest on CSF		1,650	374	-	-	2,024
Segment gross profit		89,422	60,710	18,996	1,496	170,624
Adjusted net operating expenses		(75,155)	(53,131)	(20,442)	(1,905)	(150,633)
Amortisation of acquired intangibles		(241)	(18)	-	-	(259)
Exceptional items		(4,556)	-	(1,206)	(241)	(6,003)
ERP implementation costs		(1,143)	1,143	-	-	-
Segment operating expenses		(81,095)	(52,006)	(21,648)	(2,146)	(156,895)
Adjusted operating profit/(loss)		12,617	7,205	(1,446)	(409)	17,967
Add back interest on CSF		1,650	374	-	-	2,024
Amortisation of acquired intangibles		(241)	(18)	-	-	(259)
Exceptional items		(4,556)	-	(1,206)	(241)	(6,003)
ERP implementation costs		(1,143)	1,143	-	-	-
Segment operating profit/(loss)		8,327	8,704	(2,652)	(650)	13,729
Adjusted net interest		653	(50)	(282)	(45)	276
Less interest on CSF		(1,650)	(374)	-	-	(2,024)
Segment net interest		(997)	(424)	(282)	(45)	(1,748)
Adjusted profit/(loss) before tax		13,270	7,155	(1,728)	(454)	18,243
Amortisation of acquired intangibles		(241)	(18)	-	-	(259)
Exceptional items		(4,556)	-	(1,206)	(241)	(6,003)
ERP implementation costs		(1,143)	1,143	-	-	-
Segment profit/(loss) before tax		7,330	8,280	(2,934)	(695)	11,981

Six months ended 30 June 2008 (unaudited)
		UK	Germany	France	Benelux	Total
		£'000	£'000	£'000	£'000	£'000
Revenue		708,099	379,777	147,211	15,173	1,250,260
Results
Adjusted gross profit		97,444	51,712	16,961	1,694	167,811
Adjusted net operating expenses		(88,571)	(47,612)	(18,891)	(1,762)	(156,836)
Adjusted operating profit/(loss)		8,874	4,100	(1,930)	(68)	10,976
Adjusted net interest		1,578	(446)	(813)	(37)	282
Adjusted profit/(loss) before tax		10,452	3,654	(2,743)	(105)	11,258
Reconciliation to reported profit before tax
Adjusted gross profit		97,444	51,712	16,961	1,694	167,811
Add back interest on CSF		1,479	247	-	-	1,726
Segment gross profit		98,924	51,959	16,961	1,694	169,538
Adjusted net operating expenses		(88,571)	(47,612)	(18,891)	(1,762)	(156,836)
Amortisation of acquired intangibles		(241)	(27)	-	-	(268)
Segment operating expenses		(88,812)	(47,639)	(18,891)	(1,761)	(157,104)
Adjusted operating profit/(loss)		8,874	4,100	(1,930)	(68)	10,976
Add back interest on CSF		1,479	247	-	-	1,726
Amortisation of acquired intangibles		(241)	(27)	-	-	(268)
Segment operating profit/(loss)		10,112	4,320	(1,930)	(68)	12,434
Adjusted net interest		1,578	(446)	(813)	(37)	282
Less interest on CSF		(1,479)	(247)	-	-	(1,726)
Segment net interest		99	(693)	(813)	(37)	(1,444)
Adjusted profit/(loss) before tax		10,452	3,654	(2,743)	(105)	11,258
Amortisation of acquired intangibles		(241)	(27)	-	-	(268)
Segment profit/(loss) before tax		10,211	3,627	(2,743)	(105)	10,990

Year ended 31 December 2008 (audited)
		UK	Germany	France	Benelux	Total
		£'000	£'000	£'000	£'000	£'000
Revenue		1,391,177	830,740	308,210	30,008	2,560,135
Results
Adjusted gross profit		194,934	113,703	38,821	3,372	350,830
Adjusted net operating expenses		(165,323)	(99,385)	(40,511)	(3,467)	(308,686)
Adjusted operating profit/(loss)		29,611	14,318	(1,690)	(95)	42,144
Adjusted net interest		3,472	(795)	(1,643)	(71)	963
Adjusted profit/(loss) before tax		33,083	13,523	(3,333)	(166)	43,107
Reconciliation to reported profit before tax
Adjusted gross profit		194,934	113,703	38,821	3,372	350,830
Add back interest on CSF		3,292	737	-	-	4,029
Segment gross profit		198,226	114,440	38,821	3,372	354,859
Adjusted net operating expenses		(165,323)	(99,385)	(40,511)	(3,467)	(308,686)
Amortisation of acquired intangibles		(481)	(44)	-	-	(525)
Exceptional items		(1,922)	-	(1,124)	-	(3,046)
ERP implementation costs		(1,673)	950	723	-	-
Segment operating expenses		(169,399)	(98,479)	(40,912)	(3,467)	(312,257)
Adjusted operating profit/(loss)		29,611	14,318	(1,690)	(95)	42,144
Add back interest on CSF		3,292	737	-	-	4,029
Amortisation of acquired intangibles		(481)	(44)	-	-	(525)
Exceptional items		(1,922)	-	(1,124)	-	(3,046)
ERP implementation costs		(1,673)	950	723	-	-
Segment operating profit/(loss)		28,827	15,961	(2,091)	(95)	42,602
Adjusted net interest		3,472	(795)	(1,643)	(71)	963
Less interest on CSF		(3,292)	(737)	-	-	(4,029)
Segment net interest		180	(1,532)	(1,643)	(71)	(3,066)
Adjusted profit/(loss) before tax		33,083	13,523	(3,333)	(166)	43,107
Amortisation of acquired intangibles		(481)	(44)	-	-	(525)
Exceptional items		(1,922)	-	(1,124)	-	(3,046)
ERP implementation costs		(1,673)	950	723	-	-
Segment profit/(loss) before tax		29,007	14,429	(3,734)	(166)	39,536

5 Seasonality of operations

Historically revenues have been higher in the second half of the year than in the first six months. This is principally driven by customer buying behaviour in the markets in which we operate. Typically this leads to a more pronounced effect on operating profit. In addition the effect is compounded further by the tendency for the holiday entitlements of our employees to accrue during the first half of the year and to be utilised in the second half.

6 Exceptional items

	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Restructuring costs	(6,003)		-		-
Impairment of intangible assets	-		-		(3,046)
	(6,003)		-		(3,046)

Restructuring costs in H1 2009 arise from the change programme to reduce net operating expenses. They include expenses from headcount reductions and vacant premises costs. 

For the full year 2008, the forecasted cash-flows for Computacenter France did not support the value of the non-current assets in the business. An exceptional impairment was recognised in relation to additions to intangible assets relating to the Group ERP programme that could be specifically allocated to the French cash-generating unit.

After the 2008 year-end a decision was reached to cease using the Digica brand following the integration of the Digica operations into those of Computacenter (UK) Limited. An exceptional impairment of the trademark, generated at the time of acquisition, was recognised accordingly.

7 Income tax

The charge based on the profit for the period comprises:
	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
UK corporation tax	3,270		4,087		11,881
Foreign tax	147		101		673
Adjustments in respect of prior periods	(49)		(651)		(4,028)
Deferred tax	(793)		(469)		(6,332)
	2,575		3,068		2,194

8 Earnings per ordinary share

Earnings per share (EPS) amounts are calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year (excluding own shares held).

Diluted earnings per share amounts are calculated by dividing profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year (excluding own shares held) adjusted for the effect of dilutive options.

Adjusted basic and adjusted diluted EPS are presented to provide more comparable and representative information. Accordingly the adjusted basic and adjusted diluted EPS figures exclude the amortisation of acquired intangibles and exceptional items.

	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Profit attributable to equity holders of the parent	9,406		7,922		37,337
Amortisation of acquired intangibles attributable to equity holders of the parent	259		268		525
Tax on amortisation of acquired intangibles	(67)		(67)		(150)
Exceptional items	6,003		-		3,046
Tax on exceptional items	(1,276)		-		-
Exceptional items within the tax charge for the year	-		-		(8,377)
Profit before amortisation of acquired intangibles and exceptional items	14,325		8,123		32,381
	No '000		No '000		No '000
Basic weighted average number of shares (excluding own shares held)	146,845		150,850		151,279
Effect of dilution:
Share options	3,143		2,769		3,077
Diluted weighted average number of shares	149,988		153,619		154,356

	H1 2009		H1 2008		Year 2008
	pence		pence		pence
Basic earnings per share	6.4		5.3		24.7
Diluted earnings per share	6.3		5.2		24.2
Adjusted basic earnings per share	9.8		5.4		21.4
Adjusted diluted earnings per share	9.6		5.3		21.0

9 Dividends paid and proposed

The proposed final dividend for 2008 of 5.5p per ordinary share was approved at the AGM in May 2009 and was paid on 11 June 2009. An interim dividend in respect of 2009 of 3p per ordinary share, amounting to a total dividend of £4,406,000, was declared by the Directors at their meeting on 26 August 2009. This interim report does not reflect this dividend payable.

10 Adjusted management cash flow statement

The adjusted management cash flow has been provided to explain how management view the cash performance of the business. There are two primary differences to this presentation compared to the statutory cash flow statement, as follows:

1)       Factor financing is not included within the statutory definition of cash and cash equivalents, but operationally is managed within the total net funds/borrowings of the businesses; and

 

2)       Items relating to customer-specific financing are adjusted for as follows:

 

a.       Interest paid on customer-specific financing is reclassified from interest paid to adjusted operating profit; and

b.       Where customer-specific assets are financed by finance leases and the liabilities are matched by future amounts receivable under customer operating lease rentals, the depreciation of leased assets and the repayment of the capital element of finance leases are offset within net working capital; and

c.       Where assets are financed by loans and the liabilities are matched by amounts receivable under customer operating lease rentals, the movement on loans within financing activities is also offset within working capital.

Adjusted management cash flow statement

For the six months ended 30 June 2009

	Unaudited		Unaudited		Audited
	H1 2009		H1 2008		Year 2008
	£'000		£'000		£'000
Adjusted profit before tax	18,243		11,258		43,107
Net finance income	(276)		(282)		(963)
Depreciation and amortisation	8,262		8,976		18,055
Share-based payment	1,076		1,573		2,525
Working capital movements	39,332		(5,456)		16,306
Other adjustments	(193)		(1,765)		(186)
Income taxes paid	(10,029)		(5,527)		(6,052)
Adjusted cash flow from operating activities	56,415		8,777		72,792
Net interest received	328		62		659
Capital expenditure and investments	(8,590)		(5,382)		(24,313)
Equity dividends paid	(8,097)		(8,063)		(12,021)
Proceeds from issue of shares	3		-		-
Purchase of own shares	(559)		(9,501)		(9,695)
Increase/(decrease) in net funds/(debt) excluding CSF in the period	39,500		(14,107)		27,422
Increase/(decrease) in net funds/(debt) excluding CSF	39,500		(14,107)		27,422
Effect of exchange rates on cash and cash equivalents	3,152		575		(6,626)
Net funds/(debt) excluding CSF at beginning of period	4,609		(16,187)		(16,187)
Net funds/(debt) excluding CSF at end of period	47,261		(29,719)		4,609

11 Publication of non-statutory accounts

The financial information contained in the interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The auditors have issued an unqualified opinion on the Group's statutory financial statements under International Accounting Standards for the year ended 31 December 2008. Those accounts have been delivered to the Registrar of Companies.

 

END

 

 

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